As Earth Day 2023 approaches, it’s crucial for investors, governments, and companies to reflect on the impact climate change will have on investment decisions and requirements. This year’s Earth Day theme is “Invest in Our Planet,” emphasizing the need to promote sustainable investments and contribute to a more sustainable future.
At the Canadian Securities Exchange, we have a unique perspective on the transformation happening across the capital markets. The growing demand for publicly-listed companies to consider socially responsible investing (SRI) and environmental, social, and governance (ESG) requirements is evident. More than 90% of S&P 500 companies, for example, report some kind of ESG or sustainability-related metrics, and, increasingly, smaller market cap companies are following suit.
While exact figures vary widely, the total amount of money invested in sustainable assets is now well into the trillions of dollars. Investors, be they institutional or retail, are progressively voting with their dollars and values.
Summit on Responsible Investment: A Must-Attend Event
Our first-ever Summit on Responsible Investment, to be held in Kelowna, BC in June 2023, in collaboration with Sparx Publishing Group, is a timely event for publicly-listed companies and investors seeking to learn more about SRI and ESG considerations.
Building on this year’s Earth Day message and extending on themes from Sparx’s latest issue of Make The World Better Magazine: Capital As a Force for Good, this event will explore different facets of the conversation on socially responsible investing and ESG to help participants understand the trends, requirements, and opportunities that exist in the capital markets.
Two important themes, described further below, will be discussed in more detail at the summit and underpin the need for publicly-listed issuers and investors to become familiar with this conversation.
Understanding the Similarities and Differences of SRI and ESG
SRI and ESG investing aim to promote socially responsible investments and sustainable business practices. While the two terms are often used interchangeably, they have some differences. SRI focuses on investing in companies that align with a set of ethical or moral values, while ESG considers environmental, social, and governance factors in the investment decision-making process.
The Risks of Greenwashing and the Importance of Transparency
With the increased interest in sustainable investing, there is also a risk of “greenwashing.” To avoid the risks of greenwashing, companies need to be transparent and provide accurate information about their sustainability practices, including providing detailed reports on their ESG performance and demonstrating a commitment to social and environmental responsibility.
Investors also need to be vigilant in their due diligence and ask the right questions to ensure that companies are truly committed to sustainability.
Reporting Requirements and Oversight
While the reporting requirements and frameworks for ESG, in particular, are varied, companies that wish to integrate this reporting will benefit from understanding the Exchange’s viewpoints.
Our session on ESG in Capital Markets, held virtually in October 2021 (see video below), helped to articulate the CSE’s position on requirements for listed issuers and is a great primer ahead of the summit. In short, while the CSE encourages best practices, it does not mandate them.
Ultimately, investors, via the company disclosures, will play a key role in determining whether a company is meeting its own objectives or standards. That said, regulatory bodies in the U.S. and in Canada are increasing their scrutiny of ESG-related disclosures.
Conclusion
This year’s Earth Day theme, “Invest in Our Planet,” is particularly relevant to the CSE and our stakeholders.
SRI and ESG considerations are becoming more important for publicly-traded companies, and the Summit on Responsible Investment and accompanying content, will provide a unique opportunity for companies and investors to learn more about these considerations and gain valuable insights into the latest developments in sustainable investing.
To make a real and lasting positive impact, companies must be transparent about their sustainability practices, and investors must be diligent in ensuring that companies are truly committed to sustainability.